Problems with Powers of Attorney

Often we are asked by title companies and their closing teams to prepare a power of attorney for parties that cannot sign at closing.

While humans, signing in their individual capacity, are fine to delegate their powers to other humans, a POA given from a trust, corporation, executor, administrator, limited liability company, partnership or similar "entity" or fiduciary is not favored by the law or the courts.  For such reasons, we usually decline to draft them this way, and try to steer the requesting party to a different solution.

In the case of a corporate entity such as an LLC, corporation, partnership, etc., the person signing on behalf of that entity has been entrusted with powers on behalf of the entity.  That trust and that appointment to sign on behalf of that entity is special under the law.  In the case of a corporation, the shareholders had a special meeting to elect the directors, and the directors then elected the officers, and the directors may have also had a special board meeting just to choose which officer can sign for that entity in that particular sale or refinance transaction.  Once appointed by the decision of the board, a person cannot (generally) just delegate their special powers to sign on behalf of the corporation (or LLC, or LP) to anyone they want, just because it's inconvenient for them to sign.   They were chosen.   If they cannot act, the corporation, through its board of directors, must pick someone else to sign.  So the solution is a new corporate resolution to pick a new person to act and sign.

Same idea goes for fiduciaries such as trustees, executors, etc.  They are "entrusted," quite literally, to act on behalf of a trust or an estate, and they can't just delegate their special powers via POA to anyone they want (generally).  The solution here, if they are unavailable, is to go back to the will or the trust and see who bats #2 -- trusts and wills often have alternates that can step up and act, although it may take some court action in the case of a probated estate.

Notice that I have said "generally" throughout -- sometimes we permit the use of POAs in these situations because we are in a time crunch, or some other similar bind.  But that decision and analysis is done on a case by case basis, as it involves a review of "discretionary" vs. "ministerial" duties of the agent.  Sometimes trust agreement will have language that does expressly permit the employment and use of "agents" and attorneys-in-fact to accomplish the wishes and agreements of the original  trustee, and there is law in Texas that suggests that if the agent or attorney-in-fact is simply performing the ministerial duty of signing that fiduciary's name to a document, and is not exercising discretion in what is being signed, that such authority might not violate the law or the original powers delegated to the fiduciary or corporate officer.